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What is a Remortgage?

Remortgaging is never an easy process to understand. So, we’re going to answer the following questions: What is a remortgage and is it an option for you to consider? Read on to find out!

The connotations that come with remortgaging never seem positive. Unfairly, remortgaging gets given a lot of bad press as something that people do when they’ve messed up or are in a financial mess. The truth is it’s simply not the case. We’re going to help you understand what is a remortgage. And, if you look for the right deal, remortgaging can be a very savvy move to help you save some much-needed cash.

The basics: What is a remortgage?

Essentially, for those that are asking what is a remortgage, it is basically the process of your current mortgage deal to a new one. This can be done with either your current lender or a new one entirely. Think of a remortgage as switching credit cards. You take a new credit card with 0% interest for 18 months. At the end of the 18-month offer, the rate goes up to 25%. At this point, most people switch the balance to a new 0% credit card. Mortgages are the same. You take advantage of an introductory offer of say a rate of 1.95% for two years. At the end of two years, your mortgage jumps to 4.5%. Like the credit card, a remortgage allows you to switch to a new deal. When switching rate, dependent on circumstances, you can borrow extra, pay money back, lengthen or shorten the term your mortgage is being paid over. It really is that flexible.

What are the reasons for someone to remortgage?

Doesn’t sound bad, does it? Now you understand what a remortgage is, we should try to understand why people go through with them. There are loads of reasons why people decide to remortgage. The main reason is to move to a new deal with a lower rate of interest. It's a rare occasion when a new deal isn't available at a better rate than the one you'll be dropping onto at the end of your current deal.

Another reason to remortgage at the moment is to secure your monthly payments. When you revert to your lender's standard variable rate it becomes your lenders decision as to when your mortgage payments move & by how much. Although this standard variable rate does generally take lead from the Bank of England it is at the lenders discretion. In current unsettled times, people are coming to the end of any offer & switching to a Fixed Rate mortgage. They can protect you from any sudden increases in interest rates and thus any unwanted financial strain. But, it does have its pitfalls. As your rate will be fixed if interest rates decrease then you will not benefit from a lower interest rate.

Other reasons for remortgaging are more straightforward. This can be for things such as consolidating your debts or just raising money so you can carry out home improvements or be able to afford extravagant events.

Is remortgaging the right option for you:

Another myth surrounding what is a remortgage is that you must always go with the same lender. Nowadays, people are looking for new deals and discovering new ways of saving money with other lenders.

This can be a perfect opportunity for those of you who have a good credit history and are seen to be a dependable borrower. The better record you have with either of these two things can broaden what options you have at your disposal. And why not start right away? If you’re either paying too much on your current rate or think that interest rates may change soon then why not think about changing soon? It can literally be a case where time is money! Be warned though, if you are on one of your lenders current deals you will have to pay a penalty to leave so, always check this first.

So, for those of you reading this who have a good credit history and have proved yourself to be a reliable borrower, well done! What this means is that you’ve got 100s of different lenders telling you that they can offer the best remortgaging deal for you. But wait, you’ve only just got your head around what a mortgage is so how can you digest all of this information you’re being blasted with.

Luckily for you, this is where we step in. At Mortgages Online we can offer you fee-free independent advice not just on what a remortgage is, but also on how you should compare the deals that lenders are constantly throwing in your face. Contact us or look through our website to get up to date mortgage comparison advice! Equally, if anyone without a good credit score is looking to remortgage, get in touch and we’ll do our best to answer whatever queries you have.

What fees must you pay when you are remortgaging?

While remortgaging should definitely be a viable option for most of those reading this, let’s make sure that you factor remortgaging-fees into the cost.

An arrangement fee is typically priced around the £1,000 mark. This is basically an administration fee that you must pay to your lender for arranging the mortgage & can normally be added to your loan. For those of you who used a solicitor to complete your former mortgage deal, you may have to acquire their services again. While solicitors can be pricey they are key to make sure that the remortgaging process goes smoothly and that you understand everything that is in your contract. This can normally range around the £500 mark but it will largely depend on the price of your property but, generally, remortgages are offered with free legal fees & free valuation fees.

Annoyingly, other small charges such as exit fees which may also be required for you to be discharged from your previous mortgage deal. This can be around £100. You may also have to pay a booking fee. Some lenders tend to combine this with the cost of your arrangement fee but this can typically cost around £200.

While this sounds slightly more depressing, remember that if you’re remortgaging then this will be so that you can save money long term. Don’t lose sight of this. This means that although paying these fees might seem a bit chore you should still be saving money in the long term!

MO have loads of resourced on different mortgage things. Everything from guides on mortgage rates, first-time buyers guides to bad credit mortgages – so look through our Articles for more info. And, Mortgages Online can give you a life insurance quote after the completion of your mortgage application!

All of this, for free. No need to get your credit card out! We’re fee free at MO. Use us for your mortgage search.

PaulFlavin

Paul Flavin

Paul Flavin is the Managing Director of Mortgages Online and has been working in the mortgage industry for over 20 years. Running a successful independent mortgage broker since 2010, Paul oversees Mortgages Online and creates articles regularly – drawing on his years of mortgage experience.

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